Optimal inventory order size.

Economic Order Quantity (EOQ) solves the classic inventory optimization problem: order too much and holding costs pile up; order too little and you pay order costs repeatedly. EOQ finds the order size that minimizes total annual cost. Formula: √(2 × demand × order cost ÷ holding cost per unit).

12,000 annual demand × 40 order cost × 2 holding cost per unit. EOQ = √((2 × 12,000 × 40) ÷ 2) = √480,000 = 693 units per order. 17.3 orders/year at 693 units each. Total cost at EOQ: 1,386. Any other order size costs more. EOQ is mathematically optimal assuming demand stays steady.

EOQ assumes smooth demand and no quantity discounts - real life rarely works this way. Most businesses modify EOQ for: quantity discounts (slightly bigger orders if supplier offers price breaks), safety stock (buffer for demand spikes), seasonal variation (adjust order quantity by season). Use EOQ as starting point, adjust for reality.

Run it with sensible defaults

Using annual demand of 12,000, order cost of 40, holding cost per unit annual of 2, the calculation works out to 693 units. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Annual Demand (units), Order Cost, and Holding Cost per Unit Annual — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

EOQ = √(2 × demand × order cost ÷ holding cost). Orders/year = demand ÷ EOQ. Total cost = (orders × order cost) + (EOQ/2 × holding cost). The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

Using this as a check-in

Re-run this every three months. A single reading tells you where you stand; four readings tell you whether things are improving. The trend matters more than any individual snapshot.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.